Power rates in perspective

It has become gospel in Maine that electricity prices here are outrageously high. A corollary is that utility deregulation is to blame.

As with much else involving state government, the picture isn’t as clear as it initially seems.

So far this year, Maine, according to figures from the Energy Information Administration, has the lowest average retail price for electricity, per kilowatt-hour, in New England. Through June 2010, the average retail price in Maine was 12.6 cents per kilowatt-hour; the New England average was 15 cents. Maine’s price for industrial users — 9.2 cents per kilowatt-hour — was well below the New England average of 12.6 cents.

For perspective, New England has the highest average retail electricity rates in the country. This is largely because the region lacks the low-cost coal or huge government-funded hydroelectric facilities that power electricity generating plants in much of the rest of the country.

Instead, New England, and especially Maine, is heavily reliant on natural gas to produce electricity. When natural gas prices are high, so are electricity prices here.

Siting a coal-fired power plant — or a nuclear plant — in Maine is a remote possibility in the near future. Instead, power generation companies will continue to look to the sky and water.

These, however, won’t reduce prices in the short term. Offshore wind, for example, is in its infancy and years from reality here. Land-based wind remains highly subsidized and increasingly controversial, so large amounts of electricity won’t come from this source or solar anytime soon.

This is why Maine must be more aggressive in working with neighboring Canadian provinces, which have large energy resources they want to export to the U.S. market south of Maine, to negotiate agreements to supply lower-cost electricity to the state.

Conservation also must be a big part of any effort to reduce electricity costs. Simply put, using less electricity costs less money. This is especially true at time of high energy use. Systems must be built to accommodate the highest level of use, even if it occurs infrequently. So reducing that peak — which also can be accomplished by giving consumers and businesses incentives to use electricity at off-peak times — is key to reducing overall costs.

Maine has done work in this area, but much more can be accomplished.

As for deregulation, a look back of the past decade is instructive.

In 1999, the year before deregulation took effect, Maine’s average retail electricity price was 9.8 cents per kilowatt-hour, 48 percent higher than the national average of 6.6 cents. So far in 2010, Maine’s average price is 30 percent higher than the national average of 9.7 cents.

While electricity costs are high here, the trend is in the right direction.

So, the question isn’t how to undo the damage done by deregulation. Rather, it is how to speed up Maine’s movement toward the national average.